Disrupting the Factors of Production

Producer Goods in the Role of Labor

In the centuries old scheme of factors of production, there are three -
1. Land - the raw materials necessary to produce goods for consumption
2. Labor - the human factor, skilled and unskilled
3. Capital Goods -  the machines necessary to turn the raw materials into consumable products in conjunction with labor

It is the contention of this blog that capable autonomous robots using artificial intelligence disrupt this theoretical analysis to the point of requiring a fourth factor -

4. Labor Goods - those machines possessed of intelligence that function as both Labor and Capital Goods at one and the same time

Adding in and accounting for this Fourth Factor creates economic scenarios that would have been unimaginable for Adam Smith and unthinkable for Joseph Schumpeter.
Of significance in this new scenario is the fact that any AI robot capable of substantially replacing human production labor is capable of making, maintaining, and repairing itself. That presents a solid unscalable face to what was creative destruction with its corollary phenomenon of raising the employment bar. 'Normal' comprehensible adjustment cannot be done.
An autonomous artificially intelligent robot of significant capability bankrupts classical economic theory. It is simply a matter of adding in this Fourth Factor, this producer good, this machine\labor hybrid, but that addition changes the economic analysis out of all recognition because it creates a new economic order such as has never been seen before.
Our present economy in the United States is a capitalist welfare state committed to innovation, which is to say, the market forces allocate resources to relevant entrepreneur and arbitrageur talent and those that fall victim to creative destruction in the process have a safety net to cushion the blow.
This economy is institutionally consumerist and has been since the form installment loan contract was declared legal so workers could buy refrigerators, automobiles, and houses. Consumerism evolved in an ad hoc, heuristic, fashion to absorb overproduction and in so doing created chronic overproduction. The system that these factors have brought into being is systematically criticized for its waste and nihilist commercial values but not for its princely lifestyles. Everybody wants a helicopter but nobody wants to pay the cultural cost.
This economy functions within liberal tenets and institutions that deny the importance of talent and insist that anybody can do anything with proper training. It is therefore a system in constant conflict with itself.
An autonomous artificially intelligent robot changes the whole consumerist, capitalist, dynamic reducing demand, wages, and opportunity if left to itself. This situation must be addressed. One cannot muddle through an economic innovation, an economic revolution, of this order of magnitude. Unlike other economic revolutions that have preceded it, this one does not merely change the nature of human work, it dispossesses it into a pure machine empowerment of human vision. We are not prepared for this kind of dislocation and it grows closer by the day. It is time to get ahead of the curve.
It is time to consider backcharging Labor Goods for the cost of this dispossession. As Labor Goods, they are certainly eligible for some sort of taxation and the funds so generated could be used to develop vision and perhaps, within the liberal model, generate makework projects. Such a levy would slow the deployment of these machines, but not their development, and create manageable rates of change.
I prefer the consumerist simplicity of a Universal Basic Income devoid of socialist theory. As an ad hoc  restructuring of economic profits such a consumerist device would continue to support production and provide the means to develop one's talents for the marketplace.
Whatever the concept, some address must be made, not in abstract political terms but in the sense, as trading bots have demonstrated, that you, whoever you are, are next.
Do Well and Be Well.

Meaning and Motivation: Structure, Fit, and Drive

There is always a social context to our behavior. We all have a prescribing culture influencing that behavior and either there is a myth, however personal, ordaining that culture, making that context legitimate, or one is a nihilist.
We speak of meaningful social existence and motivated people in vague generalities and specific examples. This blog is an attempt to bring order to that chaos of analysis, to rationalize, if not the actor, then the act.
What is meaning? That question drives the quest of philosophy to define goods and find happiness. What, in short, does meaning mean? For human behavior, it means personally relevant social context, structure, in which one behaves and relevance in that behavior to that context, fit, and a temporal point A in that social context worth occupying and a temporal point B beckoning, drive.
I have a personal psychological space of Victorian and transcendental symbol and canon that defines my relevant context and pragmatic values that define my behavioral repertoire simply because that era is the last instance of true continuity in Western Civilization. In this multicultural, linguistically relative, universe that has technologically been brought into being, I have to pick my relevant moments and ignore, to the extent possible, those that aren't personally relevant. This has given me a reputation for being distant and cavalier but I suspect that reputation of being authored by disordered and irrelevant social contexts. In any case, it is a condition of my existence.
Being civilized is difficult under the kind of disruptive influences that hold sway today. Civilization is found, as it has been since Byzantium, in the library and in individual lives and in those books and in those lives one finds structure, fit, and drive.

A Reality Separate from Human Perception

The philosophical standard in epistemological matters is Protagoras' 'Man is the measure of all things, of things that are that they are, of things that are not that they are not.' Being human, it is impossible to escape that judgement. Modify the mechanics of perception, certainly, but the proposition that reality is what humans perceive it to be is absolute.
Now, with advanced AI and the possibility of machine reality, we are faced with a significant exception to Protagoras' rule. Right on cue, a new embryonic body of thought with which I am only superficially familiar arises, Metamodernism. That doctrine holds there to be a reality separate from human perception which is a timely and necessary construct in the event of a divergent machine reality.
As a Whorfian pragmatist, what problems does that give me? Whorf postulated a threefold schema of language, thought, and reality which I could modify to thought, language, and perception to account for an independent reality. This done, by which language becomes a mediating influence on both thought and reality, there appears a dichotomy of perceived and unperceived reality, leaving room for a third, machine reality.

A Modest Proposal for Ethical Artificial Intelligence

There is significant discussion of ethics and artificial intelligence (AI) under way as the extraordinary potential of such systems becomes apparent. The absence of control over internal processes of neuromorphic architecture and AI programs has given everyone acquainted with the problem reason to reflect.
Is control actually a problem in AI? The lack of control is inherent in the design of programs and chips. It is what makes AI intelligent. It is no more a problem than an intelligent human being. We resist control because we are capable of ethical behavior and prefer being left to our own devices. However, it is absolute that the price of intelligent behavior is ethics. It defines the practice. It is not a problem that AI is unethical in its design state. It is just that intelligent behavior is always ethical.
The ethical robot illustrates the phenomenon. A robot may be pure motor activity and operate with impunity in a valueless surround. However, those conditions are stupid, i.e. they are not intelligent. It becomes obvious that an intelligent robot must be ethical or not be an intelligent robot. Definitely.
To this end I am proposing that a separate AI unit dedicated to ethical behavior be included in any and all systems classified as AI as a requirement for that classification. This component, a neuromorphic processor, for instance, would have a database of ethical thought which it would use to characterize the outputs of the whole AI unit as ethical or unethical.
This relatively simple adjustment, a conscience to a mind, would enable AI to achieve the status of an intelligent entity and allow the possibility of the intelligent robot, the ethical robot.

Schumpeter, Kuhn, and the Nature of Value

To ask what is 'valuable' as a generality is an empty question. The nature of value lies within each individual according to their circumstances, i.e. 'My kingdom for a horse.' In Schumpeter and Kuhn we see two very different manifestations of the process of valuation involving a notion of value coming very close to 'necessary'.
In Schumpeterian economic terms, commodities are valuable (capable of market comparison with other valuable entities). That capability drives the circular flow economy. In those terms value is the answer to a two part question. What is valuable? And how valuable is it? Keeping close to home in his analysis, his notion of valuable is a tautology: a commodity is valuable and what is valuable is a commodity. Given the philosophical nature of the question, it is a necessary tautology for an economist. Once an entity has been found valuable, necessary to the point of purchase, then the market answers the second question: how valuable is it in relation to other necessities or to place market function in context, how scarce is it?
In Kuhnian abstract terms, value is a datum that 'means' something, that has a direct connection to a paradigm and a set of rules. It can be a positive value, a predicted result, or a negative value, Kuhn's famous anomaly. Necessity applies in both cases. The discovery of the Higgs boson was a necessity to confirm physics theory. Any other result would have been an anomaly and a necessity to undermine current theory. So, meaningful data are either necessary, valuable, or unnecessary, trivial to use the term scientists use. There is no market in science but the question, how valuable, is left to individual judgment and consensus in the field, a market function without the money valuation. This is why Kuhn is so concerned with incommensurability, being incapable of comparison. Markets routinely value the scarcity of incommensurate commodities in money amounts. Scientists do not so value data and paradigms.
The marketplace of ideas is an old phrase referring to the valuation of paradigms. It is a misnomer. Markets require money, a value calculus allowing relative valuation in a market. Money definitively characterizes the relative scarcity of items like apples and oranges, to use the old illustration. Language, even rigorous language, although a rudimentary value calculus capable of assigning value and comparing data, cannot do that precisely. With language, it is all judgment and consensus.
Money and monetization define the limits of language. That which is beyond the mediating capability of language is properly subject to monetization. Kuhn, with incommensurable, defines that philosophically. He reached the limits of language, of thought. Schumpeter. working within a restricted frame that did not account for money as a value calculus assigning relative scarcity across necessary commodities in a market, consequently and brilliantly recorded interesting economic phenomena, i.e. swarms of entrepreneurs, without quite 'seeing' what he was noticing. He had reached the limits of market analysis without realizing it.
So, these two great minds, approaching the phenomenon of catastrophic change from two radically different directions agree that such events occur regularly, metaphysically in Kuhn's linguistic paradigm shift, economically in Schumpeter's monetary creative destruction. These two universes met in agreement to the existence of a phenomenon across a great divide of language, thought and reality.

The Giants of Disruption: JA Schumpeter, TS Kuhn

The first time that I encountered anything resembling the concept of disruption as used in 'disruptive innovation' [Christensen, 1997] was in the seventies. I was indulging my relentless intellectual curiosity by reading in ancient Greek philosophers on my own and, surrendering to a fit of boredom, was wandering the library aisles when a slim volume's title caught my eye. I read it and it altered my brain. It was Thomas S Kuhn's 'The Structure of Scientific Revolutions' [1962]. My thinking has never been the same since and every book I read after that was interpreted in an analytical frame of paradigm, rules, data, and anomaly.
As I wandered the tangled ways of the life of the mind, led here and there by that demanding need to know, not as an autodidact but as a curious thinking animal, I took up a study of business and economics that would lead to a degree in Operations Management. Of course in the process of acquiring the paradigms and databases of such a degree, the phrase 'creative destruction' was brought to my attention. My Kuhnian mind was immediately taken by the concept and I read Joseph A Schumpeter's 'The Theory of Economic Development' [1934]. The book structured my study of business and economics. It reordered that Kuhnian brain and, once again, my thinking was never the same.
As I continued on my intellectual way, I noticed the both authors' work rested in significant obscurity despite my personal experience of their work losing no power to explain over the years. That is the motivation for this series of blogs of which, this, the first, is a summary before the fact of the rest. The 21st century needs to know these two remarkable minds, one Berkeley, one Harvard, and their brilliant original work. It also needs to recognize the parallels in their theoretical systems and needs to take notice of their significant philosophical differences. That is the secondary purpose of these blogs.
In economic usage, the term 'disrupt' means to unsettle. There is, then, a functioning system in some sort of equilibrium or harmony and a curious unsettling incident which puts the system in disequilibrium. That is all there is to disruption. A 'disruptor', in common usage, deals in disruption, a systems agent provocateur.
The theoretical treatment of disruption requires two elements in order to 'see' disruption for what it is, a ground and a figure. The ground in disruption is an equilibrium state. The figure is a disruption to that equilibrium. In both Schumpeter and Kuhn there is great attention paid to disruption by innovation, the former in business technology, the latter in scientific theory. They both recognize disruptors with Schumpeter going so far as to name them, entrepreneurs.
In Schumpeter's creative destruction model disequilibrium occurs in cycles. The ground to this analytical frame is what has been translated as 'circular flow', an economic engine operating in perfect harmony of supply and demand. As he admits, no such economy exists. It is, like efficient markets, a useful fiction. The figure that emerges against this ground is that of entrepreneurs dealing in innovation and putting the circular flow economy in disequilibrium, swarms of entrepreneurs, as Schumpeter puts it, that occur in regular cycles.
In Kuhn's paradigm shift model, disequilibrium occurs on a necessary basis. When scientific theory cannot explain significant phenomena, there is disequilibrium and, eventually, a new theory or paradigm making new equilibrium possible. The ground to this analytical frame is 'normal science', the paradigm or theory and rules with which we interpret experience. The figure is anomaly, the critical finding that current paradigm or theory cannot explain. It is worth noting that Schumpeter assigns agency to disruption while Kuhn, respecting the brilliant minds of science history of course, does not. It is all problem and solution with him. Kuhn describes a discontinuous narrative of equilibrium, disruption, and metaphysically revolutionary change to a new equilibrium, from one universe to another. Schumpeter describes a continuous narrative of a single universe moving through constant change, driven to equilibrium but unable to achieve it.
From a philosophical point of view, the two are in, Kuhn's famous term, incommensurable (not capable of comparison) universes. They are apples and oranges. Kuhn was an instrumentalist, a theory of knowledge that says we only know what we know of reality through theoretical constructs. For him, when the theory changes, the facts change. It is a solid, pragmatic, and American approach. Schumpeter is an Aristotlean, European economist. There is a knowable fixed universe that only changes in the nuts and bolts of the economic engine. There can be no metaphysical revolution for him.
Can these two brilliant analytical frames be rationalized? Yes and no. One could rewrite Kuhn to conserve Schumpeter's theory as a special case. That would require a psychological model of generational transfer of knowledge and brain plasticity. Kuhn noted such a phenomenon as a lag in adoption but did not develop it. However, such a rewrite would do violence to Schumpeter's philosophical orientation. It would not be the same theory. Kuhn's work is comprehensive of creative destruction but Schumpeter never dreamed of paradigm shift. To say the least.

Blog series on these topics to follow.

Taxing Robots: A Naive Appreciation

First, I wish to make clear that any redistribution of wealth is in itself disruptive and polarizing. It is a brutal admission to the failure of a political economy to provide, at once, prosperity and the general welfare. Taxing robots is such a redistribution of wealth and such an admission of failure. This being said, such a tax or usage fee would manage disruption to the gain of the entire society and should be countenanced given the power and reach of smart machines. Realistically they could replace all but the most talented of us economically in the near future.
We have, since Joseph Schumpeter formally identified it, been in the business of the unprincipled business of managing disruption with a constant eye, and a shifting focus, to both prosperity and the general welfare. It is time, in that cycle, in the face of the enormous potential impact of robots and AI, to shift focus once again to the general welfare. How can this be done without destroying the market basis of material existence?
I see a bipartite process of shoring up the existing employment by mandating a Living Wage and, for all those employed by corporations, mandating affordable stock options for all employees and substantial severance packages including stock and stock options. Had these conditions been met thirty years ago, we would be much better off but still behind the curve of the catastrophic disruptive effect of smart machines. In view of this creative destruction tail wagging the dog of Life, Liberty, and the Pursuit of Happiness, intervention, however unprincipled, is in order.
Secondly, I see room for the mandated issuing of licences to deploy Artificial Intelligence and robots with a significant licencing fee. Would this inhibit disruption? Yes. Does disruption need inhibition? Yes. Unless the cost/benefit of deploying new technology includes the cost of dislocation the accounting cannot hold. Vast economic disequilibrium will occur driving market irrationality. That market insanity is, without qualification, the failure of a capitalist political economy. It requires immediate redress, and, in a heuristic unprincipled fashion, prescriptive remedy to prevent such future events. This is an attempt at such remedy and while these remedies notoriously fail in a shower of unintended consequences, as noted by Adam Smith, the history of these attempts compose a narrative from which patterns can be analyzed and more successful remedies made. As in the old saying, Rome wasn't built in a day.
This licencing fee would be significant enough, but well within what the market will bear, to fund free tuition at  the post-secondary level and a subsistence basic income for those displaced even marginally by new technology. The fee has no basis in theory, is derivative of the injunction to provide for the general welfare, and is strictly a management technique in the measured adoption of innovation. It would provide until such time as stock ownership is common, dividends are given due regard, and wholly irrational market dynamics subside.
This suggestion is not made lightly. I believe that markets allocating resources to relevant talent provide the true basis for reasonable, humane social existence. When they do not provide that basis then that is a market failure and, in consequence, a social failure. We are at present flirting with social decay and facing social disintegration in the near future. This is no time for escapism or kneejerk views of the political economy. This is a time to reason and respond ahead of the curve of innovation.